Living trust scheme that harmed seniors banned from NC

AG Cooper wins judgments against American Family Prepaid Legal and Heritage Insurance

Raleigh: Two companies that ripped off seniors are barred from doing business in North Carolina, Attorney General Roy Cooper announced today.

“Using fear and high-pressure sales tactics to trick older North Carolinians is flat out wrong,” Cooper said. “We won’t stand for companies that try to cheat seniors out of their savings.”

Superior Court Judge Carl Fox signed off this week on a judgment against American Family Prepaid Legal and a consent judgment with Heritage Marketing and Insurance and the companies’ presidents Stanley Norman and Jeffrey Norman, all of California. The companies, their successors and agents are now banned from selling prepaid legal services, estate planning services, living trusts, insurance and annuities in North Carolina. If the Normans violate the judgment, they will have to pay $500,000 each to the state

The judgments resolve a lawsuit Cooper brought against AFLP and Heritage in 2006 for using aggressive, unfair and deceptive tactics to sell living trusts and annuities to elderly consumers.

The two companies worked together, with AFLP agents visiting seniors at home and pressuring them to pay $1,995 for a living trust by preying on fears about how their estates would be handled. Once the paperwork for a living trust was complete, a Heritage sales agent delivered it and tried to convince the consumer to purchase insurance products such as equity-indexed deferred annuities.

Annuities pitched by Heritage were a poor choice for most seniors because they typically had a term of up to 20 years and included stiff financial penalties for withdrawing the principal within 15 years. Some seniors were talked into putting their entire life savings into annuities where the money would not be accessible without a penalty if they needed it for household or medical expenses. Others were convinced to switch from more suitable investments into annuities, a change that cost them tens of thousands of dollars in taxes.

AFLP collected at least $4.2 million from more than 2,100 North Carolina consumers before it and Stanley Norman declared bankruptcy last year. Heritage sold more than 900 annuities with premiums totaling $72 million, turning over the money it collected to AFLP. Although the court ordered AFLP to pay $10 million and Heritage to pay $7 million to the state, the state is unlikely to recover that money because of the bankruptcies.

Cooper also reached an agreement to prohibit Michelle Norman, wife of Jeffrey Norman and manager of Quest Financial and Insurance Services, which works with National Association of Family Benefits, Inc., from doing business in North Carolina. The agreement prevents Michelle Norman and her company from using Heritage and AFLP customer lists to solicit the companies’ North Carolina victims.

“We’re fighting back against scammers who target seniors,” Cooper said. “If you or a loved one has been the victim of a scam, let us know about it.”

Consumers can call the Attorney General’s Consumer Protection Division toll-free within North Carolina at 1-877-5-NO-SCAM.